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Companies in France
Thread poster: Patricia Posadas

Patricia Posadas  Identity Verified
Spain
Local time: 09:49
Member (2002)
English to Spanish
+ ...
Aug 18, 2003

I have read in the Blueboard a comment from a colleague concerning a French translation agency:

"Legally required VAT No. not existing. Refuses to pay the legally required VAT in my invoice from Germany."

I don't know how well known this is for non-French colleagues, but in France you can be legally established as a company and be exempted from VAT when you go into business, I think for the first 2 years. This special regime is called 'microentreprise'.

Another thing concerning the facts mentioned in this blueboard posting: no VAT is paid in operations between EEC countries such as Germany and France as far as professional services are concerned. And this even if you are not exempted from VAT.

I don't know the agency in question and don't know their payment practices but I feel the comment in the Blueboard may be misleading for some colleagues interested in bidding for a multilingual job they have posted today.


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Claudia Iglesias  Identity Verified
Chile
Local time: 04:49
Member (2002)
Spanish to French
+ ...
Very interesting, Patricia Aug 18, 2003

Please send all the information you have (link to the BB and this comments) to the Jobs Area coordinators
They will be able to contact the translator and the agency.

I think you're right, it can be misleading, although the agency is notified when a comment is made in the BB and can answer.

[Edited at 2003-08-18 17:11]


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Ralf Lemster  Identity Verified
Germany
Local time: 10:49
English to German
+ ...
VAT exemption only applies to taxable persons Aug 18, 2003

Hi Patricia,
As usual, these issues should be discussed with a tax advisor.

I don't know how well known this is for non-French colleagues, but in France you can be legally established as a company and be exempted from VAT when you go into business, I think for the first 2 years. This special regime is called 'microentreprise'.

Another thing concerning the facts mentioned in this blueboard posting: no VAT is paid in operations between EEC countries such as Germany and France as far as professional services are concerned. And this even if you are not exempted from VAT.


I don't think this is quite correct: although VAT registration may be voluntary in certain EU member countries (given certain prerequisites), you cannot benefit from input tax deduction and tax exemption for intra-community services unless you are VAT-registered. Proof of VAT registration is provided in the form of the EU VAT ID.

Check the FAQ list for the VAT ID verification page - particularly FAQ #18:

"What do I have to do if I can not check the validity of the VAT number of my customer?

If you believe that your customer is not a taxable person, you should not exempt the supply but should charge VAT."

Tax experts out there, correct me if I'm wrong, but I don't believe professional services are automatically exempt from VAT.

Best regards, Ralf


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Harry Bornemann  Identity Verified
Mexico
English to German
+ ...
You have to charge him VAT.. Aug 18, 2003

.. except if you are not charging VAT to anybody.

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Kevin White  Identity Verified
Local time: 10:49
German to English
VAT - Luxembourg Aug 18, 2003

Hi there,

I have done some jobs for a company from Luxembourg that claims they do not have to pay VAT, although I am billing them from Germany where we are required to pay it (and charge it, I thought).

Does anybody know about this? Thank you,

Kevin


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Ralf Lemster  Identity Verified
Germany
Local time: 10:49
English to German
+ ...
Be careful... Aug 18, 2003

...or you might end up being liable for VAT included in your price, regardless of whether or not you actually collected it.

As I said before, it's important to check this - either with your tax advisor, or with the tax authorities.

I have done some jobs for a company from Luxembourg that claims they do not have to pay VAT, although I am billing them from Germany where we are required to pay it (and charge it, I thought).

Whether or not you're required to charge VAT depends on your financial circumstances - check the FAQ of the German Ministery of Finance for details.

If, however, you are registered for VAT, you also need to charge it on cross-border services rendered, unless your customer provides you with a valid EU VAT ID - for them simply to say they don't have to pay it has no relevance at all, I'm afraid.

Best, Ralf


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Uldis Liepkalns  Identity Verified
Latvia
Local time: 11:49
Member (2003)
English to Latvian
+ ...
In my country, Aug 18, 2003

namely Latvia, VAT doesn't apply for cross border payments. I even cannot mention it in my invoice. (AFAIK, it's the same in Germany- when I bought a car there; I paid VAT, which was refunded to me on the border when I took the car outside Germany).
And we do not have to pay VAT from foreign transactions.
As for VAT applicable persons- here you become a VAT payer, if your turnover as a company in a year exceeds 10 000 Ls (about 16 000 EUR). But it is disadvantage not to be a VAT payer, as then your partners have to take care of it, it means additional
trouble for their accountancies, so in general nobody prefers to deal with non VAT payer.

Uldis

[Edited at 2003-08-18 21:24]


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Williamson  Identity Verified
United Kingdom
Local time: 09:49
Flemish to English
+ ...
VAT explained ... again. Aug 19, 2003

It is a very simple principle:

VAT is a typical EU-phenomena:
So, if you have a VAT-number and you deal with another entity (person/company) that has a VAT-number within the same country you charge VAT.
At the end of the quarter, you pay the VAT-balance i.e. VAT you received-VAT you paid for buying goods and services to your VAT-tax-office.
It is the end-customer who does not have a VAT-number who will pay VAT.
If you deliver a good or service to another EU-Member-State, you mention your VAT-number and the VAT-number of your end-client. The VAT is "transported" from say Greece to Finland.
If the end-customer has a VAT-number he does not have to pay VAT.
If the end-customer in the other EU-Member-State does not have a VAT-number, he pays VAT.
This is the principle of "deflection of levy"(hope I got the right denomination) whereby the tax is paid at the receiving end. It has nothing to do with being professional or not. A medical doctor, lawyer, dentist... is professional too and these people do not have nor do they need a VAT-number.

[Edited at 2003-08-19 09:19]


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Rod Darby  Identity Verified
Ghana
Local time: 08:49
German to English
+ ...
step by step Aug 19, 2003

at Ralf's request I'd like to put in my ha'porth:

Steffen wrote on UTS:
1) "UTS" doesn't exist as a company.
2) No registration.
3) Legally required VAT No. not existing.
4) Refuses to pay the legally required VAT in my invoice from Germany.
5) Refuses registered mail.

since Steffen is writing from Germany, I'll restrict my tax-related remarks to the situation in Germany (which is the only one I'm familiar with). However:
1) and 2) doesn't have to be, of course: lots of people are "Einzelunternehmer", and if several of them, then "Gesellschaften bürgerlichen Rechts", which don't need registering.
3) USt.-IDNr. not a legal requirement (in Germany), but useful if you're doing cross-border stuff!
4) incorrect I'm afraid: see § 3a Abs. 4 i.V.m. Abs. 4 UStG - the work will, according to German law, be deemed to be done in France (!) and therefore cannot attract German VAT
5) very strange indeed!

sorry, have been called to lunch - buzz me if more needed!

HTH,
Rod


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Ralf Lemster  Identity Verified
Germany
Local time: 10:49
English to German
+ ...
Treading in your steps... Aug 19, 2003

Thanks for looking at this, Rod. There is something, however, that I don't quite get here:

4) incorrect I'm afraid: see § 3a Abs. 4 i.V.m. Abs. 4 UStG - the work will, according to German law, be deemed to be done in France (!) and therefore cannot attract German VAT


I'm with you as far as the qualification of translations as a "Sonstige Leistung" in §3a(4) is concerned - is your interpretation of the work being "done" in France based on §3a(3) ("Ist der Empfänger einer der in Absatz 4 bezeichneten sonstigen Leistungen ein Unternehmer, so wird die sonstige Leistung abweichend von Absatz 1 dort ausgeführt, wo der Empfänger sein Unternehmen betreibt.")?

Thanks for clarifying.
Ralf


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Ralf Lemster  Identity Verified
Germany
Local time: 10:49
English to German
+ ...
Follow-up Aug 19, 2003

I contacted my tax advisor in this matter - reassuringly, it took them a few moments to get back to me.

According to their advice, the concept of transferring the place of service into the recipient's country (which would negate the charging of German VAT) is accurate, but only for "entrepreneurs" in the tax sense ("Unternehmer" in German tax law), pursuant to §3a(3) UStG. The EU VAT ID is proof of that capacity - failing to produce it means that the service is deemed to have been rendered at the place of the provider.

In summary: unless the French customer provides the EU VAT ID, and provided the German translator must calculate VAT, no exemption applies.

HTH - Ralf


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Rod Darby  Identity Verified
Ghana
Local time: 08:49
German to English
+ ...
deeper and deeper Aug 19, 2003

Ralf,

quite right, I was referring to the fact that §3a (3) iVm (4) UStG places the 'Ort der sonstigen Leistung' in France if UTS is an 'Unternehmer'. Now, if they quote an UStIdNr (which you can have confirmed), you can be sure they are an 'Unternehmer'. If they don't, though, they may still be an 'Unternehmer' and simply not have applied for an UStIdNr. I would recommend to potential suppliers (translators) that they insist on UTS supplying an UStIdNr: "sonst kein Geschäft".

If they are definitely not an 'Unternehmer', then you were right, Steffen, in charging them USt.

Just to round that one out for our "Zaungäste", if they were outside the EU, it wouldn't matter whether they were an Unternehmer or not, Ort der sonstigen Leistung would be their "Sitz/Wohnsitz", i.e. no USt.

Now, let's get back to this Kleinunternehmer thing. In Germany - unlike, say, the UK - you are IN Umsatzsteuer (which is the correct name, by the way - s. Umsatzsteuergesetz: Mehrwertsteuer just describes the way it works and is an unprofessional expression in the opinion of most tax consultants I know), unless you can find some way of getting OUT.

The way out is "Kleinunternehmer i.S.d. § 19 UStG". A KU can say on 1 January: "my turnover (=gross revenue) last year did not exceed 16,620 euro and in the current year is not expected to exceed 50,000 euro". On any 1 January he/she can't say that, he/she falls into the "Regelbesteuerung".

Now, as long as you are a KU you MAY not put USt. on your bills (if you do, you owe it), and you can't claim "Vorsteuer" out of invoices from suppliers.

And being OUT means, entertainingly enough, that "Die . . . GESCHULDETE UMSATZSTEUER (my capitals) . . . wird . . . NICHT ERHOBEN . . . ". O Danke, Sir.

And, finally, you can opt out of being a KU anytime, if you want: best to ask a tax consultant about that, though.

Last comment: even if UTS were the French equivalent of a KU (was that 'microentrepreneur'? - love it!), it could get itself given an UStIdNr on application, assuming there's an equivalent to § 27a UStG in France, which there ought to be, since EU VAT law is allegedly harmonised. It's comforting to know there is room for "Märchen" in the EU!

Rod

P.S. the above is only a record of my experience in these matters - if you need "put-my-hand-in-the-fire" advice, you need a steuerliche(r) Berater/conseiller fiscal/chartered accountant.

P.P.S. just had a look at UTS' Proz profile: don't want to start another discussion, but - for a translation agency - their English ain't too good, ey?


[Edited at 2003-08-19 17:14]


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Rod Darby  Identity Verified
Ghana
Local time: 08:49
German to English
+ ...
one step back Aug 19, 2003

ah, now I see it: I should have written § 3a Abs. 3 i.V.m. Abs. 4 UStG in my first posting - sorry for the confusion, Ralf: mea culpa, mea maxima culpa!
Rod

P.S. what's the singular of 'criterias', then: one criteria?


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Patricia Posadas  Identity Verified
Spain
Local time: 09:49
Member (2002)
English to Spanish
+ ...
TOPIC STARTER
I am back Aug 22, 2003

I am on holiday but just got a connection in a public place.

"Microentreprises" (in France) are VAT exempted, so they do not apply VAT and they can't recover VAT imposed on them either. They can decide to declare VAT if this is more interesting for them.

This is what the French tax offcicers explained to me. Two of my French customers do not have a VAT number and I inquired at the tax service in Bayonne (France) where I was told this was perfectly legal.

If you can read French: http://www.mininfo.minefi.gouv.fr/document/dgi_5.pdf

"Ce régime est caractérisé par :
- une franchise totale de TVA :
Les bénéficiaires de la franchise en base de TVA sont dispensés de la déclaration et du
paiement de la taxe. En contrepartie, ils ne peuvent pratiquer aucune déduction de la TVA se rapportant aux biens et aux services acquis pour les besoins de leur activité, ni faire apparaître la TVA sur leurs factures, notes d’honoraires ou sur tout autre document en tenant lieu qu’ils délivrent à leurs clients.
Ils peuvent toutefois opter pour le paiement de la taxe. Cette option couvre une période de 2 années civiles et doit s’accompagner du choix d’un régime réel d’imposition (réel simplifié ou réel normal) qui vaudra pour la TVA et l’imposition du bénéfice."


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Patricia Posadas  Identity Verified
Spain
Local time: 09:49
Member (2002)
English to Spanish
+ ...
TOPIC STARTER
Ralf Aug 22, 2003

"I don't think this is quite correct: although VAT registration may be voluntary in certain EU member countries (given certain prerequisites), you cannot benefit from input tax deduction and tax exemption for intra-community services unless you are VAT-registered. Proof of VAT registration is provided in the form of the EU VAT ID."

I meant this was another thing whichmade the blueboard message confusing. Even if you are VAT registered, no VAT is applicable. I am a professional in Spain and I can't charge VAT on invoices to German companies. One German company I work for recently sent a message to all translators working for them, reminding us that we should not include VAT in our invoices if we are not based in Germany.

So I don't understand why the translator who put the comment on the Blueboard wants to be paid VAT. He is in Germany and the company is in France. I may have missed something, that is why I posted this thread.


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